What You (Don’t) Know About Trump: The Huge Holes In Disclosure Rules And How They Could Be Fixed

n a glitzy New York City block, nestled between Radio City Music Hall and CBS’ world headquarters, sits 1290 Avenue of the Americas. It’s a typical Manhattan skyscraper, home to investment firms, law practices and an insurance company. Except it’s partly owned by the President of the United States—and partly financed by the government of China.

At a time when Trump is waging a trade war with Beijing, such an arrangement could create ethical concerns. And yet the federal filing meant to reveal the president’s potential conflicts of interest, his 92-page annual financial disclosure report, makes no mention of the building’s $950 million mortgage or the fact that Trump’s 30% stake in the property puts him on the hook for 30% of that partly Chinese-financed debt.

Nor does it mention Trump’s 30% share of the $564 million mortgage on a San Francisco tower that he similarly co-owns. Or his half of a mortgage taken out against the Las Vegas hotel he owns with billionaire GOP donor Phil Ruffin.

Donald Trump

Oliver Contreras

It’s all perfectly legal. Federal ethics laws require public servants to list everything from credit card balances to boat loans—but not the debt held by their businesses, even if their lender is a foreign power. In fact, a close reading of the rules shows a long list of financial arrangements and entanglements that can be kept secret. Government officials can partner with foreign investors, take in money from foreign governments and apparently stash money in their family members’ names, all without ever having to tell the public.

That might not seem like a big deal at first blush, but taken to their logical extreme, the laws could permit large-scale conflicts of interest to go undetected. One purely hypothetical—but legally possible—scenario: Vladimir Putin himself could give a $1 billion business loan to Donald Trump and, as long as he gives it to “Trump Organization LLC,” “Trump Payroll Corp” or one of the president's 493 other companies, Trump wouldn’t have to disclose it to anyone.

Sounds outlandish, until you consider the headlines that Trump administration officials have already made. Jared Kushner took an official meeting with the CEO of Citigroup last year, a month before his family's Kushner Companies got a $325 million mortgage from Citi for a Brooklyn office complex. (Citi says the loan wasn't discussed in the meeting.) Kushner didn’t disclose any of it, so it wasn't publicly known until The New York Timesuncovered the meeting and another he took with a private equity billionaire whose firm also loaned Kushner money shortly thereafter. And, as Forbes has reported, commerce secretary Wilbur Ross spent much of his first year in office helping negotiate U.S.-China trade deals—while he was a partner in a shipping company that is partly owned by the Chinese government.

It’s a scenario that the Office of Government Ethics never prepared for and isn’t empowered to handle. “The way the agency was created by Congress kind of assumes that the president and his people will be the ones standing on the shining pillar as an example to the whole rest of the government,” says Marilyn Glynn, who served as the OGE’s acting director under George W. Bush. “It seems as if everything’s turned around right now and OGE doesn't have the power to make the changes that might be needed.”

In fact, a close reading of the rules shows a long list of financial arrangements and entanglements that can be kept secret.

The agency, which wouldn't comment for this story, lacks the authority to investigate ethics violations, issue subpoenas, question witnesses, demand documents or punish people who violate the rules. Its director is appointed by, and reports to, the president and can be fired at any time. The director can ask federal agencies to investigate their own employees and can alert the Department of Justice to potential criminal violations, but that’s about it.

Plus, lying on the forms is a crime only if the mistakes can be proven to be intentional. For a year now, Forbes has tracked Ross forgetting to disclose assets and falsely claiming to have gotten rid of holdings that he had promised to divest, all of which he has simply brushed aside as “errors."

“The financial disclosure rules are the result of compromises and are antiquated,” says Norm Eisen, a former Obama ethics czar and U.S. ambassador. “They were built for another day and time—not for the complicated financial entanglements of the Trump administration.”

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merica has a long history of mixing business with politics. Members of Ulysses S. Grant’s administration lined their pockets with whiskey tax kickbacks and plotted to corner the gold market through insider trading. Benjamin Harrison was given a 23-room summer home by the man he appointed postmaster general. Harrison allegedly said it would be unethical for him to accept the gift—but his wife, the First Lady, could. (Following public outcry, the Harrisons ended up paying for the property.) Warren Harding’s secretary of the interior secretly leased federal oil reserves in exchange for cash.

19th century reforms helped crack down on the patronage system that let parties fill government offices with political supporters and even got one president (James Garfield) assassinated by a spurned jobseeker. But it wasn’t until after the Watergate scandal that the government got serious about inspecting public officials’ personal finances.

In 1976 Jimmy Carter made reform a top campaign promise and pushed a new bill through Congress that created the modern executive branch ethics system, with mandatory financial disclosures for public employees, restrictions on conflicts of interest and a new agency to oversee it all, the Office of Government Ethics. Carter hailed it as a “milestone in the history of safeguards against abuse of the public trust.”

From the beginning, the system has been incomplete. The financial disclosure program—the government’s primary tool for identifying and preventing conflicts of interest—requires officials to file annual forms that lay out their assets, income, debt and gifts. But there are dozens of workarounds, gray areas and outright omissions in the law that officials can exploit to hide holdings, conceal debt and shield conflicts from the public’s view.

Jimmy Carter

Besides not having to report any debt held by their businesses, Donald Trump and the members of his administration don’t have to say who any of their business partners are. That goes for Wilbur Ross’ investment in the shipping company alongside the Chinese, and the two most valuable holdings in Trump’s entire portfolio: skyscrapers in New York and San Francisco that the president doesn’t have to say he owns with billionaire Steven Roth. Even though Roth is a donor whom Trump reportedly tapped for a spot on his (now dissolved) infrastructure council.

Public officials who own businesses while in office don’t have to disclose who their customers are. Trump collects an estimated $175 million a year in rent from more than 150 tenants who lease commercial space in his buildings, some of whom have business before the federal government. He doesn’t have to tell the public who any of these tenants are. Jared Kushner’s real estate business is similarly murky.

What’s more, officials can hide their ties to troublesome assets by anonymously transferring them to family and friends. They don’t have to disclose the buyer of anything they sell, whether it’s a stock, a luxury condo or an entire business. And if they give an asset to someone rather than sell it, they don’t even have to disclose that a transaction occurred at all.

Agriculture secretary Sonny Perdue transferred control of investments worth at least $8 million—including a stake in a multi-million-dollar grain-merchandising business—to his adult children shortly after taking office. The assets no longer have to appear on his disclosure form, as if he never owned them at all—even though his actions leading the USDA could have benefited his family by boosting the value of the grain company, which the Perdues have since decided to sell.

And there appears to be enough slack in the law to benefit public officials down the road, too. In some cases, those officials could get their "divested" investments right back once he or she leaves office if they’re placed into certain trusts with wink-wink agreements about who really owns them.

“The financial disclosure rules are the result of compromises and are antiquated,” says Norm Eisen, a former Obama ethics czar and U.S. ambassador.

Even the laws surrounding what does need to be disclosed are imprecise enough to conceal the true size of a conflict of interest and mask suspicious fluctuations over time. Filers must list assets and liabilities, but only in broad ranges—topping out at “greater than $50 million,” even for a $400 million skyscraper or $2 billion loan. When it comes to the income these holdings produce, the high end of the range is even less helpful: “greater than $5 million.” Spouses face less scrutiny—the range for their investments tops out at just "greater than $1 million." The 15 members of Trump’s Cabinet and their spouses own a collective 26 investments that produced more than $1 million of income in 2017, but there’s no way to know how much more.

Lax rules have been around since Carter was president, but for decades buttoned-up politicians—fearful of being perceived as corrupt—have largely sidestepped them by opting to put their assets in blind trusts or bland mutual funds and government bonds. Then Donald Trump won the White House and brought his rich friends along with him.

Rex Tillerson divested his stake in Exxon, and other incoming Cabinet members agreed to sell some of their most troublesome assets, but the new administration brought substantial portfolios with them to the government. Steven Mnuchin kept a number of opaque private holdings, as did DeVos and Ross. Kushner kept much of his real estate empire.

Jared Kushner

Instead, the officials have promised to recuse themselves from matters that benefit their business interests—a plan that works only when those business interests are fully known. “Most people in the past were willing to divest,” says Virginia Canter, an ethics lawyer in the Clinton and Obama White Houses. “This administration has taken a very high-risk approach—they’ve said, ‘We’ll recuse,’ but they haven’t been very transparent in how they identify potential conflicts of interest.”

t’s not that there isn’t a better way. Many of the omissions in financial disclosure laws could be solved with the stroke of a pen or a slight adjustment to the law, including simple reforms like requiring the disclosure of business partners and lenders. Customers who account for more than a certain percentage of the revenues of a public official’s company could be added to the disclosure forms easily as well. And more scrutiny of immediate family members, such as additional monitoring of family trusts before and after officials’ time in office, could stamp out suspicious transfers of worrisome assets. But only if the OGE is given greater authority.

Even the laws surrounding what does need to be disclosed are imprecise enough to conceal the true size of a conflict of interest and mask suspicious fluctuations over time.

“Congress should be clamping down,” says Richard Painter, who served as the chief ethics lawyer in George W. Bush’s White House. Watchdog groups have put forth a number of proposals to reform the agency, including granting it investigatory powers to actually look into ethics violations itself and punish officials for breaking the rules. Many have also suggested making the OGE’s director fireable only for cause and ending the president’s exemption from criminal conflict-of-interest laws. Last year Walter Shaub—who famously clashed with Trump as head of the OGE until early 2017—sent Congress 13 detailed recommendations, which include granting the agency greater independence and patching up some of the loopholes surrounding trusts.

In May two Democratic lawmakers introduced bills that would adopt some of these proposals. They were quickly joined by 32 cosponsors (all Democrats) but have otherwise gone nowhere. The legislature, which has granted the OGE a measly $16 million budget, has yet to show serious interest in revamping the ethics system.

In the meantime it’s hard to imagine the president agreeing to do anything to restrict his family’s business or rein in his administration. But that could all change if the House and Senate flip in November or if ethics scandals continue to plague the government. Recalling the days of Watergate and the laws—antiquated as they are—that resulted, Eisen, the former Obama ethics lawyer, notes: “Every time we have a flourishing of corruption like this, it’s followed by a burst of reform.”